S&P 500 Declines After Record; Bonds Rise, Dollar Slips

Five tael gold bars are arranged for a photograph at the Chinese Gold and Silver Exchange Society in Hong Kong. Photographer: Brent Lewin/Bloomberg

March 21 (Bloomberg) -- U.S. stocks fell after the Standard
& Poor’s 500 Index climbed to a record, while Treasuries gained
and the dollar weakened. Russian stocks slid after the country
completed its annexation of Crimea.

The S&P 500 fell 0.3 percent to 1,866.40 at 4 p.m. in New
York, after reaching an all-time high of 1,883.97. The yield on
10-year Treasuries fell for the first time in three days, losing
three basis points to 2.74 percent. The MSCI Emerging Markets
Index gained 0.4 percent as Hong Kong’s Hang Seng China
Enterprises Index climbed 2.4 percent after entering a bear
market yesterday. Moscow’s Micex Index lost 1 percent. The
dollar lost 0.1 percent against the euro. Gold and oil advanced.

U.S. stock trading was subject to swings today because of
quadruple witching, when futures and options contracts on
indexes and individual stocks expire. The S&P 500 advanced 1.4
percent this week as better-than-estimated economic data
overshadowed concern that benchmark interest rates may rise in
the middle of next year. The European Union extended the list of
prominent Russians subject to sanctions for their part in the
annexation of Crimea, while ratings companies cut the nation’s
outlook.

“It’s a combination of it being witching day, plus the
continuation of uncertainty on the geopolitical front,” Chad
Morganlander, a Florham Park, New Jersey-based fund manager at
Stifel Nicolaus & Co., which oversees about $150 billion of
assets, said in a telephone interview. “That’s forced the
traders to square their books going into the weekend. Days like
this are typically volatile.”

Erasing Gains

The S&P 500 erased gains today after reaching levels it has
repeatedly failed to surpass this month. Before today, its
previous intraday high was 1,883.57, reached March 7, and the
gauge touched 1,881.94 on March 6 and 1,882.35 on March 11. The
index has climbed 0.4 percent for March, and is up 1 percent for
the quarter.

The benchmark gauge rose 0.6 percent yesterday as reports
on leading indicators and regional manufacturing topped
forecasts. Reports on housing, gross domestic product and
durable goods are among the economic data due next week. The
index lost 0.6 percent and Treasury yields jumped the previous
day after Federal Reserve Chair Janet Yellen said the central
bank’s stimulus program could end this fall and the rates could
rise about six months later.

Fed Stimulus

Three rounds of Fed stimulus and low interest rates have
helped boost the equity gauge as much as 178 percent from a 12-year low as U.S. stocks enter the sixth year of a bull market.
Policy makers met this week as economic reports indicated the
economy is pulling out of a slowdown linked to unusually harsh
winter weather.

“The consensus believes that the stock market will
continue moving higher as long as the economy improves,” Matt
Maley, an equity strategist with Miller Tabak & Co., said in a
phone interview from Boston. “But whether that’s enough to keep
it rallying is another thing entirely.”

Treasury 30-year bonds rose as investors reevaluate how
quickly Fed officials will increase interest rates. Fed Bank of
St. Louis President James Bullard defended Yellen’s forecast on
interest-rate increases, saying her remarks were in line with
private surveys on when the central bank might start tightening
policy.

Bullard also said that while the Fed is watching for signs
of asset bubbles, policy makers don’t have a “preoccupation”
with discouraging risk-taking.

Two-year notes were little changed to yield 0.43 percent,
after surging seven basis points on March 19, the biggest one-day rise since 2011.

Emerging Markets

Developing-market equities posted a weekly gain of 0.8
percent, the most in more than a month and paring losses this
year to 5.8 percent. The benchmark trades at a price-to-book
ratio of 1.4, its cheapest level versus the MSCI World Index
since 2004.

Chinese shares rallied amid speculation the government is
loosening funding restrictions for property developers and banks
to support growth. The Shanghai Composite Index climbed 2.7
percent, its biggest gain in four months.

Russia’s Micex Index fell and the yield on government bonds
due February 2027 jumped 12 basis points to 9.42 percent.

The European Union signed an accord with Ukraine and
expanded sanctions, amid the worst standoff between Russia and
the West since the Cold War. S&P and Fitch Ratings cut Russia’s
credit outlook to negative. U.S. President Barack Obama
yesterday authorized potential future penalties on Russian
industries including financial services, energy, metals and
mining, defense and engineering.

The Stoxx Europe 600 Index gained 0.1 percent as euro-area
consumer confidence increased more than economists forecast in
March, adding to signs that the currency bloc’s recovery is
gaining traction. The gauge capped its biggest weekly advance in
five weeks, rising 1.8 percent.

Dollar, Aussie

The Bloomberg Dollar Spot Index, which monitors the U.S.
currency against its 10 major counterparts, retreated 0.2
percent. The index had its biggest weekly gain in two months,
advancing 0.6 percent for the five days, amid bets the Fed is
moving toward raising interest rates.

The Australian dollar rose against all of its 16 major
peers on speculation the country’s growth will defy a slowdown
in China. It strengthened 0.5 percent to 90.84 U.S. cents today.

Gold advanced for the first time in five days, rising 0.4
percent to $1,336 an ounce on increasing demand for a haven.
Bullion slumped this week after reaching a six-month high on
March 17 amid turmoil over Ukraine. Oil added 0.6 percent to
$99.46 a barrel today.

Palladium rose 2.3 percent and touched the highest level
since August 2011 on concern that sanctions will trim supplies
from Russia, the world’s biggest supplier of the metal used in
pollution-control devices for cars.

Copper gained 0.8 percent after reaching a 44-month low
this week. The metal has dropped this month on concern demand
from top consumer China is poised to slow and as the Fed
continued to trim its bond-buying program and signal higher
interest rates.